2. JP Inc. is a small company in the business of producing and selling musical CDs and cassettes and it is also involved in promoting concerts. JP's stock htis been listed on the NASDAQ for the last two years and is trading at twice the book value of equity. (The book value of equity is $120M). JP derives 75% of its total market value from its record/CD business and 25% from the concert business. While the price data on the company is insufficient to estimate a beta, the beta of comparable firm in these businesses is as follows. Business Record/CD Concert Business Average asset beta 0.88 1.13 The debt is composed of ten year bonds of 60M at maturity with annual coupon payment of 5M per year and is rated A (typical A rated bonds are yielding 10% currently in the market). The current risk free rate is 8% and market risk premium is 5.5%. Assume no corporate taxes (7 marks) a. Estimate the current cost of equity? b. Estimate the current weighted average cost of capital